At-will employment: Difference between revisions

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Undid revision 466219227 by Kriswarner (talk) Revert original research, cited source DOES NOT DISCUSS EFFECTS OF AT-WILL EMPLOYMENT
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In most states, employment is generally considered "at will," meaning that the employer can terminate employment (or the employee may voluntarily leave) at any time. An employer's right to fire an employee may be limited, however, where the employee can show that the employer entered into either an explicit contract to retain the employee for a certain length of time, or an "implied contract" which dictates that employment will be terminated only for specific disciplinary reasons.
In most states, employment is generally considered "at will," meaning that the employer can terminate employment (or the employee may voluntarily leave) at any time. An employer's right to fire an employee may be limited, however, where the employee can show that the employer entered into either an explicit contract to retain the employee for a certain length of time, or an "implied contract" which dictates that employment will be terminated only for specific disciplinary reasons.


The doctrine of at-will employment has been criticized as predicated upon flawed assumptions about the inherent distribution of power and information in the employee-employer relationship and for its brutal harshness upon employees.<ref>John W. Budd, ''Employment with a Human Face: Balancing Efficiency, Equity, and Voice'' (Ithaca: Cornell University Press, 2004), 86-88.</ref><ref>[[Clyde Summers|Clyde W. Summers]], ''Employment At Will in the United States: The Divine Right of Employers'', 3 U. Pa. J. Lab. & Emp. L. 65 (2000).</ref> Regardless, the doctrine is widely credited as one of the major factors behind the strength of the U.S. economy; this thesis has been advanced by leading scholars in the field of [[law and economics]] such as Professors [[Richard Allen Epstein|Richard A. Epstein]]<ref>Roger Blanpain, Susan Bison-Rapp, William R. Corbett, Hilary K. Josephs, & Michael J. Zimmer, ''The Global Workplace: International and Comparative Employment Law - Cases and Materials'' (New York: Cambridge University Press, 2007), 101-102.</ref> and [[Richard Posner]].<ref>Richard Posner, ''Overcoming Law'' (Cambridge: Harvard University Press, 1995), 305-311.</ref> In particular, at-will employment has been credited with making possible the success of [[Silicon Valley]] as an entrepreneur-friendly environment.<ref>Alan Hyde, ''Working in Silicon Valley: Economic and Legal Analysis of a High-Velocity Labor Market'' (Armonk, NY: M.E. Sharpe, 2003), xvi and 92-97. Hyde's book explores "how high-velocity work practices contribute to economic growth," including and especially the dominant American high-velocity work practice of at-will employment.</ref> Contrary to this, however, is recent research which shows that "[b]y every measure of small-business employment, the United States has among the world’s ''smallest'' small-business sectors (as a proportion of total national employment)."<ref>John Schmitt and Nathan Lane. 2009. "[http://www.cepr.net/documents/publications/small-business-2009-08.pdf An International Comparison of Small Business Employment.]" Washington, DC: Center for Economic and Policy Research, p. 1.</ref> This suggests a much less clear link between at-will employment and entrepreneurship.
The doctrine of at-will employment has been criticized as predicated upon flawed assumptions about the inherent distribution of power and information in the employee-employer relationship and for its brutal harshness upon employees.<ref>John W. Budd, ''Employment with a Human Face: Balancing Efficiency, Equity, and Voice'' (Ithaca: Cornell University Press, 2004), 86-88.</ref><ref>[[Clyde Summers|Clyde W. Summers]], ''Employment At Will in the United States: The Divine Right of Employers'', 3 U. Pa. J. Lab. & Emp. L. 65 (2000).</ref> Regardless, the doctrine is widely credited as one of the major factors behind the strength of the U.S. economy; this thesis has been advanced by leading scholars in the field of [[law and economics]] such as Professors [[Richard Allen Epstein|Richard A. Epstein]]<ref>Roger Blanpain, Susan Bison-Rapp, William R. Corbett, Hilary K. Josephs, & Michael J. Zimmer, ''The Global Workplace: International and Comparative Employment Law - Cases and Materials'' (New York: Cambridge University Press, 2007), 101-102.</ref> and [[Richard Posner]].<ref>Richard Posner, ''Overcoming Law'' (Cambridge: Harvard University Press, 1995), 305-311.</ref> In particular, at-will employment has been credited with making possible the success of [[Silicon Valley]] as an entrepreneur-friendly environment.<ref>Alan Hyde, ''Working in Silicon Valley: Economic and Legal Analysis of a High-Velocity Labor Market'' (Armonk, NY: M.E. Sharpe, 2003), xvi and 92-97. Hyde's book explores "how high-velocity work practices contribute to economic growth," including and especially the dominant American high-velocity work practice of at-will employment.</ref>


Several statutory and judge-made exceptions to the doctrine exist, especially if unlawful [[discrimination]] is involved regarding the termination of an employee. These restrictions (explained below) have been controversial; an empirical study in 1992 by the [[RAND Corporation]] showed that imposing exceptions to at-will employment resulted in a long-term drop in aggregate employment of two to five percent.<ref>Timothy Sandefur, ''The Right to Earn a Living: Economic Freedom and the Law'' ([[Washington, D.C.]], [[Cato Institute]], 2010), 235-236.</ref>
Several statutory and judge-made exceptions to the doctrine exist, especially if unlawful [[discrimination]] is involved regarding the termination of an employee. These restrictions (explained below) have been controversial; an empirical study in 1992 by the [[RAND Corporation]] showed that imposing exceptions to at-will employment resulted in a long-term drop in aggregate employment of two to five percent.<ref>Timothy Sandefur, ''The Right to Earn a Living: Economic Freedom and the Law'' ([[Washington, D.C.]], [[Cato Institute]], 2010), 235-236.</ref>

Revision as of 10:01, 17 December 2011

At-will employment is a doctrine of American law that defines an employment relationship in which either party can break the relationship with no liability, provided there was no express contract for a definite term governing the employment relationship and that the employer does not belong to a collective bargaining group (i.e., has not recognized a union). Under this legal doctrine:

In most states, employment is generally considered "at will," meaning that the employer can terminate employment (or the employee may voluntarily leave) at any time. An employer's right to fire an employee may be limited, however, where the employee can show that the employer entered into either an explicit contract to retain the employee for a certain length of time, or an "implied contract" which dictates that employment will be terminated only for specific disciplinary reasons.

The doctrine of at-will employment has been criticized as predicated upon flawed assumptions about the inherent distribution of power and information in the employee-employer relationship and for its brutal harshness upon employees.[1][2] Regardless, the doctrine is widely credited as one of the major factors behind the strength of the U.S. economy; this thesis has been advanced by leading scholars in the field of law and economics such as Professors Richard A. Epstein[3] and Richard Posner.[4] In particular, at-will employment has been credited with making possible the success of Silicon Valley as an entrepreneur-friendly environment.[5]

Several statutory and judge-made exceptions to the doctrine exist, especially if unlawful discrimination is involved regarding the termination of an employee. These restrictions (explained below) have been controversial; an empirical study in 1992 by the RAND Corporation showed that imposing exceptions to at-will employment resulted in a long-term drop in aggregate employment of two to five percent.[6]

As a means of downsizing, such as closing an unprofitable factory, a company may terminate employees en masse. However, there are legal limitations upon the employer's ability to terminate without reason.[7]

Origins

The at-will rule has its genesis in a rule in Horace Gray Wood’s 1877 treatise on master-servant relations. Wood cited four U.S. cases as authority for his rule that when a hiring was indefinite, the burden of proof was on the servant to prove that an indefinite employment term was for one year.[8] In Toussaint v. Blue Cross & Blue Shield of Michigan, the Court noted that "Wood’s rule was quickly cited as authority for another proposition."[9]

Some courts saw the rule as requiring the employee to prove an express contract for a definite term in order to maintain an action based on termination of the employment.[10] Thus was born the U.S. at-will employment rule, which allowed discharge for no reason. This rule was adopted by all U.S. states. In 1959 the first judicial exception to the at-will rule was created by one of the California Courts of Appeal.[11] Later, in a 1980 landmark case involving ARCO, the Supreme Court of California endorsed the rule first articulated by the Court of Appeal.[12] The resulting actions by employees are now known in California as Tameny actions for wrongful termination in violation of public policy.[13]

Since 1959, several common law and statutory exceptions to at-will employment have been created.

Common law protects an employee from retaliation if the employee disobeys an employer on the grounds that the employer ordered him or her to do something illegal or immoral. However, in the majority of cases, the burden of proof remains upon the discharged employee. No U.S. state but Montana has chosen to statutorily modify the employment at-will rule.[14] In 1987, the Montana legislature passed the Wrongful Discharge from Employment Act (WDEA). The Montana Act is unique in that, although it purports to preserve the at-will concept in employment law, it also expressly enumerates the legal bases for a wrongful discharge action.[9] Under the WDEA, a discharge is wrongful only if: "it was in retaliation for the employee's refusal to violate public policy or for reporting a violation of public policy; the discharge was not for good cause and the employee had completed the employer's probationary period of employment; or the employer violated the express provisions of its own written personnel policy."[15]

Public policy exceptions

U.S. states (red) with a public policy exception

Under the public policy exception, an employer may not fire an employee if it would violate the state's public policy doctrine or a state or federal statute.

This includes retaliating against an employee for performing an action that complies with public policy (such as informing the authorities of an illegal activity, for instance nursing home abuse[16]), as well as refusing to perform an action that would violate public policy. In this diagram, the pink states have the 'exception', which protects the employee.


As of October 2000,[17] forty-three U.S. states and the District of Columbia recognize public policy as an exception to the at-will rule.[18]

The 7 states which do not have the exception are:

Implied contract exceptions

See also: Implied in fact contract
U.S. states (red) with an implied-contract exception

Thirty-seven U.S. states (and the District of Columbia) also recognize an implied contract as an exception to at-will employment.[17] Under the implied contract exception, an employer may not fire an employee "when an implied contract is formed between an employer and employee, even though no express, written instrument regarding the employment relationship exists."[17] Proving the terms of an implied contract is often difficult, and the burden of proof is on the fired employee. Implied employment contracts are most often found when an employer's personnel policies or handbooks indicate that an employee will not be fired except for good cause or specify a process for firing. If the employer fires the employee in violation of an implied employment contract, the employer may be found liable for breach of contract.

37 US states have an implied-contract exception, thus 13 do not. Those 13 states are:

The implied-contract theory to circumvent at will employment must be treated with caution. In 2006, the Texas Court of Civil Appeals in Matagorda County Hospital District, Petitioner v Christine Burwell, Respondent,[20] held that a provision in an employee handbook stating that dismissal may be for cause, and requiring employee records to specify the reason for termination, did not modify an employee's at-will employment. The New York Court of Appeals, that state’s highest Court, also rejected the implied-contract theory to circumvent employment at will. In Anthony Lobosco, Appellant v New York Telephone Company/NYNEX, Respondent,[21] the court restated the prevailing rule that an employee could not maintain an action for wrongful discharge where state law recognized neither the tort of wrongful discharge, nor exceptions for firings that violate public policy, and an employee's explicit employee handbook disclaimer preserved the at-will employment relationship.

Covenant of good faith and fair dealing exceptions (aka. "Implied-in-law" Contracts)

See also: Quasi-contract
U.S. states (red) with a covenant-of-good-faith-and-fair-dealing exception

Only eleven U.S. states have recognized a breach of an implied covenant of good faith and fair dealing as an exception to at-will employment.[17][22] These 11 states are:

This exception for a covenant of good faith and fair dealing represents the most significant departure from the traditional employment-at-will doctrine. Rather than narrowly prohibiting terminations based on public policy or an implied contract, this exception – at its broadest – reads a covenant of good faith and fair dealing into every employment relationship. It has been interpreted, by some courts, to mean either that employer personnel decisions are subject to a “just-cause” standard or that terminations made in bad faith or motivated by malice are prohibited.

Statutory exceptions

Although all U.S. states have a number of statutory protections for employees, most wrongful termination suits brought under statutory causes of action use the federal anti-discrimination statutes which prohibit firing or refusing to hire an employee because of race, color, religion, sex, national origin, age, or handicap status. Other reasons an employer may not use to fire an at-will employee are:

  • for refusing to commit illegal acts – An employer is not permitted to fire an employee because the employee refuses to commit an act that is illegal.
  • family or medical leave – federal law permits most employees to take a leave of absence for specific family or medical problems. An employer is not permitted to fire an employee who takes family or medical leave for a reason outlined in the Family and Medical Leave Act.
  • not following own termination procedures – often, the employee handbook or company policy outlines a procedure that must be followed before an employee is terminated. If the employer fires an employee without following this procedure, the employee may have a claim for wrongful termination.

Examples of federal statutes include:

  • Equal Pay Act of 1963 (relating to discrimination on the basis of sex in payment of wages);
  • Title VII of the Civil Rights Act of 1964 (relating to discrimination on the basis of race, color, religion, sex, or national origin);
  • Age Discrimination in Employment Act of 1967 (relating to certain discrimination on the basis of age with respect to persons of at least 40 years of age);
  • Rehabilitation Act of 1973 (related to certain discrimination on the basis of handicap status);
  • Americans with Disabilities Act of 1990 (relating to certain discrimination on the basis of handicap status).
  • The National Labor Relations Act provides protection to employees who wish to join or form a union and those who engage in union activity. The act also protects employees who engage in a "concerted activity".[23]
  • In addition to being fired based on status in a protected class (race, gender, etc.), employers are not allowed to retaliate against any protected action. "Protected actions" include suing for wrongful termination, testifying as a witness in a wrongful termination case, or even opposing what they believe (whether they can prove it or not) to be wrongful discrimination.[24] In the recent federal case of Ross v. Vanguard, Raymond Ross successfully sued his employer for firing him due to his allegations of racial discrimination.[25]

See also

Notes

Public Domain This article incorporates text from this source, which is in the public domain: Charles J. Muhl, U.S. Bureau of Labor Statistics, The employment-at-will doctrine: three major exceptions, Retrieved 6 February 2010

  1. ^ John W. Budd, Employment with a Human Face: Balancing Efficiency, Equity, and Voice (Ithaca: Cornell University Press, 2004), 86-88.
  2. ^ Clyde W. Summers, Employment At Will in the United States: The Divine Right of Employers, 3 U. Pa. J. Lab. & Emp. L. 65 (2000).
  3. ^ Roger Blanpain, Susan Bison-Rapp, William R. Corbett, Hilary K. Josephs, & Michael J. Zimmer, The Global Workplace: International and Comparative Employment Law - Cases and Materials (New York: Cambridge University Press, 2007), 101-102.
  4. ^ Richard Posner, Overcoming Law (Cambridge: Harvard University Press, 1995), 305-311.
  5. ^ Alan Hyde, Working in Silicon Valley: Economic and Legal Analysis of a High-Velocity Labor Market (Armonk, NY: M.E. Sharpe, 2003), xvi and 92-97. Hyde's book explores "how high-velocity work practices contribute to economic growth," including and especially the dominant American high-velocity work practice of at-will employment.
  6. ^ Timothy Sandefur, The Right to Earn a Living: Economic Freedom and the Law (Washington, D.C., Cato Institute, 2010), 235-236.
  7. ^ Lipsig, Ethan (1996). Downsizing: Law and Practice. Washington, DC: BNA Books. pp. 14–35. ISBN 1570180075. {{cite book}}: Unknown parameter |coauthors= ignored (|author= suggested) (help)
  8. ^ Id. at 601, 292 N.W.2d at 886.
  9. ^ a b Id.
  10. ^ Id. at 603, 292 N.W.2d at 887.
  11. ^ Petermann v. Int'l Bhd. of Teamsters, Chauffeurs, Warehousemen, & Helpers of Am., Local 396, 174 Cal. App. 2d 184, 344 P.2d 25 (1959)
  12. ^ Tameny v. Atlantic Richfield Co. 27 Cal. 3d 167 (1980).
  13. ^ Gantt v. Sentry Insurance, 1 Cal. 4th 1083 (1992).
  14. ^ Robinson, Donald C., "The First Decade of Judicial Interpretation of the Montana Wrongful Discharge from Employment Act (WDEA)", 57 Mont. L. Rev. 375, 376 (1996).
  15. ^ Mont. Code. Ann. § 39-2-904 (2008)
  16. ^ "Wrongful Discharge - An Exception to the At-Will Employment Doctrine". Retrieved May 24, 2010.
  17. ^ a b c d Muhl, Charles (January 2001). "The employment-at-will doctrine: three major exceptions" (PDF). Monthly Labor Review. Retrieved 2006-03-20.
  18. ^ In Adams v. George W. Cochran & Co., 597 A.2d 28 (D.C. App. 1991), the District of Columbia Court of Appeals carved out a narrow public policy exception to the at-will employment doctrine. The appellate court held that the exception is "when the sole reason for the discharge is the employee's refusal to violate the law, as expressed in a statute or municipal regulation." 597 A.2d 28, 32. In 1997, this exception was expanded in Carl v. Children's Hospital, 702 A.2d 159 (D.C. App. 1997). The court held that, in addition to the exception articulated in Adams, wrongful discharge would also include a violation of public policy if the public policy is "solidly based on a statute or regulation that reflects the particular public policy to be applied, or (if appropriate) on a constitutional provision concretely applicable to the defendant's conduct." 702 A.2d 159, 163.
  19. ^ Section 448.102, Florida State Statutes 2010
  20. ^ 49 Tex Sup J 370, 2006 Tex LEXIS 137
  21. ^ 751 N.E.2d 462 (2001)
  22. ^ It is unclear whether courts in the District of Columbia recognize a good-faith covenant exception. In Kerrigan v. Britches of Georgetowne, Inc., 705 A.2d 624 (D.C. App. 1997), the District of Columbia Court of Appeals ruled against the plaintiff, who alleged that his employer had violated a "covenant of good faith and fair dealing" in conducting sexual harassment investigation against him. It is unclear if the Court of Appeals recognized the good-faith covenant but that the plaintiff did not prove a violation of the covenant, or whether the court did not recognized the good-faith covenant exception at all.
  23. ^ Haymes, John; Kleiner, Brian H. (2001). "Federal and state statutory exemptions to At-Will employment". Managerial Law. 43 (1/2): 92–8. doi:10.1108/03090550110770381.
  24. ^ US: Equal Employment Opportunity Commission. "Retaliation". Retrieved 04-10-2009. {{cite web}}: Check date values in: |accessdate= (help) [dead link]
  25. ^ US: Equal Employment Opportunity Commission. "Vanguard Group to Pay $500,000 for Retaliation". Retrieved 2009-04-18.

References

  • Highstone v. Westin Engineering, Inc., No. 98-1548 (8/9/99) - at-will relationship must be clear to the employees
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